Employers are hiring all wrong

Employers are hiring all wrong

Most employers don’t know whether their hiring methods actually produce good hires, or how much time or money it costs to fill jobs. They don’t review the outcomes of their methods.

“Obsessed with new technologies and driving down costs, they largely ignore the ultimate goal: making the best possible hires,” says Wharton labor researcher Peter Cappelli, in the Harvard Business Review article, “Your Approach to Hiring Is All Wrong.”

What this means to you

Go around the recruiting and hiring systems employers want you to use, because they don’t work.

Summary

Cappelli says the root cause of most hiring is drastically poor retention. You’re most likely to change jobs and employers because your current employer is unlikely to promote you and provide new opportunities internally. This creates churn in the labor market and, ultimately, results in tremendous costs to fill jobs — an average of $4,129 per job in the United States.

Excerpts

Where are the hiring metrics?

Only about a third of U.S. companies report that they monitor whether their hiring practices lead to good employees; few of them do so carefully, and only a minority even track cost per hire and time to hire. Imagine if the CEO asked how an advertising campaign had gone, and the response was “We have a good idea how long it took to roll out and what it cost, but we haven’t looked to see whether we’re selling more.”

Failure to develop employees

In the era of lifetime employment, from the end of World War II through the 1970s, corporations filled roughly 90% of their vacancies through promotions and lateral assignments. Today the figure is a third or less. When they hire from outside, organizations don’t have to pay to train and develop their employees. Since the restructuring waves of the early 1980s, it has been relatively easy to find experienced talent outside. Only 28% of talent acquisition leaders today report that internal candidates are an important source of people to fill vacancies—presumably because of less internal development and fewer clear career ladders.

More is bad, so scare away the applicants

Recruiting and hiring consultants and vendors estimate that about 2% of applicants receive offers. Unfortunately, the main effort to improve hiring—virtually always aimed at making it faster and cheaper—has been to shovel more applicants into the funnel.

Much better to go in the other direction: Create a smaller but better-qualified applicant pool to improve the yield… If the goal is to get better hires in a cost-effective manner, it’s more important to scare away candidates who don’t fit than to jam more candidates into the recruiting funnel.

Hiring good employees

How to determine which candidates to hire—what predicts who will be a good employee—has been rigorously studied at least since World War I. The personnel psychologists who investigated this have learned much about predicting good hires that contemporary organizations have since forgotten, such as that neither college grades nor unstructured sequential interviews (hopping from office to office) are a good predictor, whereas past performance is.

Since it can be difficult (if not impossible) to glean sufficient information about an outside applicant’s past performance, what other predictors are good? … There is general agreement… that testing to see whether individuals have standard skills is about the best we can do… Only 40% of employers, however, do any tests of skills or general abilities, including IQ. What are they doing instead? Seventy-four percent do drug tests, including for marijuana use…

The advice on selection is straightforward: Test for skills. Ask assessments vendors to show evidence that they can actually predict who the good employees will be. Do fewer, more-consistent interviews.

HR vendors: Fresh & cool but unvalidated

Be wary of vendors bearing high-tech gifts. Into the testing void has come a new group of entrepreneurs who either are data scientists or have them in tow. They bring a fresh approach to the hiring process—but often with little understanding of how hiring actually works… These vendors have all sorts of cool-sounding assessments, such as computer games that can be scored to predict who will be a good hire. We don’t know whether any of these actually lead to better hires, because few of them are validated against actual job performance.

Wild HR technology

When applications come—always electronically—applicant-tracking software sifts through them for key words that the hiring managers want to see. Then the process moves into the Wild West, where a new industry of vendors offer an astonishing array of smart-sounding tools that claim to predict who will be a good hire. They use voice recognition, body language, clues on social media, and especially machine learning algorithms—everything but tea leaves. Entire publications are devoted to what these vendors are doing.

News I want you to use

What all this tells us is that employers suck at hiring, and if you follow the rules the Employment System itself is likely to prevent you from landing a new job — because it doesn’t work. Go around!

Employers don’t assess outcomes of hiring methods

It’s impossible to get better at hiring if you can’t tell whether the candidates you select become good employees. If you don’t know where you’re going, any road will take you there. You must have a way to measure which employees are the best ones.

Why is that not getting through to companies? Surveyed employers say the main reason they don’t examine whether their practices lead to better hires is that measuring employee performance is difficult.

Treat your job search like a business task

Like the sales manager who asks, “Is what we’re doing generating sales?”, you must learn to ask, “Is what I’m doing getting me job offers?”

Your boss checks to see whether the work you are doing yields the expected results — that’s a business task.

  • Pursue companies carefully — don’t chase job postings
  • Look for managers who know how to recruit and hire
  • Control your interactions with every employer

Just because employers behave like dummies when it comes to hiring doesn’t mean you have to play along or encourage them. Apply your business skills to the business task of getting the right job.

Organizations that don’t check to see how well their practices predict the quality of their hires are lacking in one of the most consequential aspects of modern business.

The truth hurts employers, but it hurts job seekers even more. I’ve only touched on what you can do to capitalize on Cappelli’s findings and suggestions. How can we use this news?

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Why employers should pay job applicants

In the April 29, 2014 Ask The Headhunter Newsletter, a reader suggests getting paid before getting hired, or why waste time interviewing?

Again and again, companies waste my time while they “assess” me in endless interviews and with employment tests. They’re wasting my time and theirs, but they don’t care because they are getting paid. I’m not.

The problem is not hard to see: The managers and HR people don’t select their candidates very carefully to begin with because it’s no skin off their backs. If they had to pay for my time, I’d bet they’d be a lot more accurate. Do you think it would be wise for employers to pay for the privilege of assessing job applicants, as a way to make hiring more efficient and productive? (And to stop wasting my time!)

Nick’s Reply

I wrote a column about a related subject last year: Why employers should pay to interview you. I’m even going to crib from it a bit.

pay-applicantsJob applicants devote hours of unpaid professional time to an employer, and then wait patiently for a hiring decision by the promised date. Inevitably, employers interview way more applicants than they can justify and ignore their own timelines without any updates or comments to the applicants. Why? Because job candidates are free.

That’s wrong. I agree it’s time for employers to put some skin in the game, if only because it would make them think twice about the costs they impose on applicants. More important, I think it would improve the quality of the selection process and of their hires.

What if employers had to pay to assess candidates for jobs? What if one employer started doing the right thing? Would others follow?

Matt Mullenweg is the creator of the most popular website platform in the world: WordPress powers over 60 million websites, and 66% of all English-based websites. The Ask The Headhunter blog runs on WordPress, and I consider it one of the best software tools I’ve ever used. WordPress is an open source project, but Matt’s company, Automattic, is a for-profit business.

Earlier this year, Harvard Business Review published a short article by Mullenweg: Hire by Auditions, Not Resumes. Automattic’s interview and hiring process is unusual: The interview isn’t over, and you’re not hired, until Automattic pays you to complete the process.

Now, let’s be clear: You don’t get paid to show up for your first interviews with Automattic. But once the discussion gets serious, so does this employer. According to Mullenweg:

“Before we hire anyone, they go through a trial process first, on contract. They can do the work at night or over the weekend, so they don’t have to leave their current job in the meantime. We pay a standard rate of $25 per hour, regardless of whether you’re applying to be an engineer or the chief financial officer.”

In my first book, The New Interview Instruction Book, I called this “doing the job to win the job.” That is, if you want a job, show up and actually do the work to show you’re worth hiring.

But if you’re going to invest that kind of time and effort to be evaluated hands-on, you shouldn’t be doing it for free. The employer should put skin in the game, too — and Automattic does. The ROI for the company is tremendous.

“There’s nothing like being in the trenches with someone, working with them day by day,” writes Mullenweg. “It tells you something you can’t learn from resumes, interviews, or reference checks. At the end of the trial, everyone involved has a great sense of whether they want to work together going forward. And, yes, that means everyone — it’s a mutual tryout. Some people decide we’re not the right fit for them.”

Automattic hires about 40% of people it tries out. Turnover is ridiculously low. Paying job candidates while Automattic assesses them pays off. In virtually every other company, the hiring process is rote, stupid, and inaccurate because it’s automated. Human review of applicants is the last thing any employer wants to invest in.

Around the world, hiring is a massively screwed up process because business doesn’t make any meaningful investment in it. Buying resumes from job boards and paying personnel jockeys to scan applicants’ keywords isn’t an investment — it’s a joke. But paying for the benefit of assessing people on the job, inside your company, on your time — that’s an investment. I doubt Automattic selects candidates lightly.

Mullenweg says, “It’s a huge time commitment, coordinating the short-term work being done by job applicants.”

Of course it is. And it should be. It’s costly, so a lot of care goes into the process up front, and this limits errors markedly. Mullenweg personally spends a third of his time on hiring. That’s more than even I recommend. (I suggest managers need to spend 15%-20% of their time recruiting and hiring, and I know few managers that do.)


What if you’re the job hunter?
Would you ask an employer to pay you to check you out? If that’s too much, then at least consider Conrado Hinojosa’s provocative The No-Nonsense Interview Agreement instead. It serves a similar purpose: It adds a measure of thoughtfulness to the experience.


I challenge any HR manager to explain why it’s okay to take hours and hours of a job applicant’s time without paying for it. I also challenge them to show me how their hiring methods are more accurate than Mullenweg’s. If your company does what Automattic does, I’d like to hear about it. In fact, I’ll gladly highlight your company in an upcoming column.

In the meantime, I think employers should start paying job candidates to assess them. My bet is that it would improve their business and operations dramatically.

What is a job applicant’s time worth to an employer? What are hiring errors worth? Would paying job applicants pay off to employers?

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